Question

Constructing a balance sheet. You have just been hired to manage a new store that has...

Constructing a balance sheet.

You have just been hired to manage a new store that has not yet started business, but has had some financial transactions.  You know it is vitally important to keep accurate financial records. Create a balance sheet for the first day of business based on the following information:

April 1, year 1 (business start date):

The owner puts $100,000 of his own money into the business.

The owner also took out a bank loan of $100,000.  No principal payment until Jan, year 2, then repay principal at $1000 per month.  Interest payable monthly starting May 1 at 8% annually (.66666% monthly) on the outstanding balance.

Purchases a building for $150,000. Puts $50,000 down and a 30 year mortgage on the remainder at 10% interest rate. This is separate from the bank loan above. Payments start May 1.  Payments are principal of $500 per month.

Purchases $50,000 worth of inventory

Purchases software for $3500 that will be expensed as an operating cost, not carried as an asset.

Purchases manufacturing equipment for $50,000, but will not pay for it until May 30, year 1.  No interest.

Thankk You for the help!

Homework Answers

Answer #1
Balance Sheet
December 31, Year 1
Asset Liabilities
Current asset Current Liabilities
Cash 31950 Accounts payable 0
Accounts Receivable 0 Interest Payable 6000
Inventory 50000 Total current Liabilities 6000
Total Current Asset 81950 Long Term Liabilities
Mortgage Loan 96000
Bank Loan 100000
Total Long term Liabilities 196000
Property, Plant & Equipment Total Liabilities 202000
Building 150000 Stockholder's equity
Equipement 50000 Common Stock 100000
Total Property, Plant & Equipment 200000 Retained Earnings -20050
Total stockholder's equity 79950
Total asset 281950 Total Liabilities & Stockholder's equity 281950
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